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U.S. Uncleared Swap Margin, Capital and Segregation Rules

Presentation by Davis Polk & Wardwell LLC – snipped – Introduction – U.S. prudential regulators (the OCC , Federal Reserve, FDIC, FCA and FHFA) and the CFTC have finalized uncleared swap margin , capital and segregation requirements (the “PR rules,” and “ CFTC rules,” respectively, and the “final rules,” collectively [note – The CFTC has not yet finalized its capital rules applicable to swap dealers that are not prudentially regulated by a U.S. prudential regulator). The PR rules apply to swap entities that are prudentially regulated by a U.S. prudential regulator (“PR CSEs”). The CFTC rules apply to swap entities that are regulated by the CFTC and that are not prudentially regulated (“CFTC CSEs”). In this memorandum, “covered swap entities” refersto PR CSEs and CFTC CSEs, together;  The SEC has proposed, but not yet finalized, uncleared swap margin and capital rules that would apply to security – based swap dealers and major security-based swap participants not prudentially regulated by a U.S. prudential regulator;  The final rules are broadly similar to the Basel Committee on Banking Supervision’s and the International Organization of Securities Commissions’ 2013final policy framework on margin requirements for uncleared derivatives (as modified in March 2015). The variation margin compliance deadline for a given covered swap entity and counterparty is either September 1, 2016 or March 1, 2017, and the initial margin compliance deadline is phased in between September 1, 2016 and September 1, 2020, each depending upon the size of the covered swap entity’s (and its affiliates’) combined swap positions with the counterparty…”

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